Monday 15/07/19

  1. In MACRO & CURRENCY NEWS, China’s economy faces challenges and Huawei-bashing sees consequences while emerging markets could be facing another currency crisis
  2. In UK CONSUMER NEWS, high street footfall weakens and the housing market’s not looking too hot either
  3. In INDIVIDUAL COMPANY NEWS, a karaoke machine maker aims for a flotation
  4. In OTHER NEWS, I bring you quite possibly the cutest kitten ever…



So China has some issues and emerging markets face another potential currency crisis…

China’s soaring pork inflation threatens key central bank rate (Financial Times, Hudson Lockett) sounds like a joke title for an article – but it’s not. China’s pig stocks are still suffering in the wake of the outbreak of African swine fever and prices are accelerating so quickly that the country’s consumer price index (CPI) is on track to exceed the central bank’s target rate. * SO WHAT? * China’s pork market is the biggest in the world and pork has a major influence on China’s CPI. It seems that outbreaks are now slowing down after a huge cull (although there appears to be widespread evidence of under-reporting) but the last time something like this happened in 2008, the pork price shot up by over 80% and pushed the CPI to 8.7%. China’s agricultural ministry estimated in April that the pork price could rise by more than 70% in the second half of this year.

China growth at its slowest since 1992 as Beijing struggles to juice economy (Wall Street Journal, Chao Deng) shows that China’s GDP growth fell 6.2%, its slowest pace since at least 1992. This figure undershot market expectations but Mao Shengyong, a National Bureau of Statistics spokesman, said that China had “sufficient policy reserves” to sort things out in the second half, including more tax cuts and an increase in infrastructure spending. * SO WHAT? * It just goes to show how much the US-China tariff war is now feeding through to the economy as investments for the quarter were weak and exports fell.

Talking of which, Manufacturers move supply chains out

of China (Wall Street Journal, Austen Hufford and Bob Tita) shows how American companies are moving production outside China (we’ve already seen Japanese companies like Nintendo do this) as trade tensions between the two countries continue. Interestingly, many companies have said that once they move, they will stay moved – but then again, I think that this was bound to happen anyway given that rising wages mean that China isn’t as cheap as it used to be and Vietnam, India, Taiwan and Malaysia have all become more attractive production destinations in relative tersm. Companies that make Crocs, Yeti beer coolers and GoPro are among those making the shift. Mind you Huawei plans extensive layoffs in the US (Wall Street Journal, Dan Strumpf) shows the other side of this as the constant Trump administration Huawei-bashing continues to have an effect as the company announced that it will be cutting a lot of staff, particularly in its US-based R&D subsidiary Futurewei Technologies. * SO WHAT? * Markets may well get excited each time Xi and Trump look like even touching a telephone, but the fact is nothing’s really going to change until a real deal is on the table. We’ll just have to wait and see. When/if they get to an agreement, there will be the mother of all relief rallies IMHO, but who benefits long term will obviously depend on the detail.

Then in Inflation rise fuels currency crisis (Daily Telegraph, Tom Rees) we see that Nomura believes that the currencies of Argentina, Turkey, Pakistan, South Africa, Sri Lanka and Ukraine are all potentially in danger due to its proprietary indicator, which has a strong track record for predicting currency crises, showing them up as being particularly vulnerable. Turkey’s lira took a pasting last week after President Erdogan p!ssed of the Americans and in Argentina, the peso dropped by 35% as inflation hit an eye-watering 60%.



The UK high street sees lower traffic and the housing market continues to look downbeat…

High street suffers ‘summer slump’ as Brexit and wet weather bite (The Guardian, Rupert Jones) cites the latest figures from the British Retail Consortium (BRC) which show that customer footfall was at its lowest level for June for seven years. Mind you, as the BRC’s chief exec Helen Dickinson pointed out, “Poor footfall this June led to a significant fall in the sales figures for the month…Last year’s World Cup and glorious sunshine set a high bar which 2019’s slow consumer spending and Brexit uncertainty failed to live up to”. Disappointing, but hardly surprising!

Then in Survey hits hopes of housing market recovery (The Times, Miles Costello) we see that asking prices for

residential property have fallen for the first time in a year, according to the latest monthly survey by online estate agent Rightmove, with particular weakness in houses with four bedrooms or more. * SO WHAT? * The interesting thing about this is that it stands in contrast to recent stats from RICS (which last week showed its strongest reading since August last year) and Nationwide (which found that house prices had risen slightly in June) although Halifax said that house prices had fallen slightly. The differences in each survey come down to the different methodologies used and demographics. For instance, Halifax and Nationwide base their findings on approved mortgages but Halifax has more customers in the north and Nationwide’s are more in the south. The RICS measure uses property valuations of chartered surveyors and is based on the balance of those reporting rising prices and those reporting falling prices and Rightmove looks at asking prices – NOT what the houses actually sold for. You can see why it’s best not to rely on any one of the above, but to know what you are looking for (e.g. trends in asking prices in the north of England) and pick the most appropriate survey!



Roxi has something it wants to sing about…

Yes, I will admit that it is an unusually slow news day today, but Music service sitting pretty on float plans (The Times, Simon Duke) makes the cut today as the “upstart” music streaming business backed by Robbie Williams and Sheryl Crow is aiming for a stock market flotation in the autumn for a valuation of about £50m. Roxi Music makes a karaoke

machine that connects to your TV and offers music streaming, games and karaoke for £99.95, including 12 months’ access to its 30m-strong song catalogue. Once you’ve gone over the year, it costs £5 a month and the device is targeted specifically at the older user who wants something simple. * SO WHAT? * Sounds like a reasonable enough idea but I would say that its appeal is quite niche at the moment. There are so many other apps out there that can do roughly the same thing, so although Roxi has a hardware device, I think it needs to expand into something else. If Spotify turned around and decided to get into karaoke, for instance, Roxi would be dead IMHO.



And finally, in other news…

Many of you will know that I am very much a dog person – but I do actually like cats as well! I defy any of you not to at least want to say “ahhhhh” when you see Tiny munchkin kitten sleeps like an angel in the cutest position, winning hearts of Instagram (SoraNews24, Dale Role A nice way to start the week!

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Some of today’s market, commodity & currency moves (as at 0835hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq**DAX *CAC-40 *Nikkei **Shanghai **
7,506 (-0.05%)27,332 (+0.90%)3,014 (+0.46%)8,24412,323 (-0.07%)5,573 (+0.38%)National Holiday2,942 (+0.40%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

(markets with an * are at yesterday’s close, ** are at today’s close)